Lender Wins Auction for Allied Fiber’s Southeast Assets

July 28th, 2016 by · 3 Comments

In April, Allied Fiber's biggest lender forced its southeastern subsidiaries into bankruptcy after a longstanding financial dispute with the company.  An auction was set up, and that auction is now complete as of a couple weeks ago.  AF-Southeast LLC has received court approval to sell its assets to that same lender, Strome Mezzanine Fund IV LP for $24M.

While there were many interested parties, it seems that when the dust settled, Strome was the 'only qualified bidder' still in the game.  Strome has promised to assume and honor existing IRUs and all that, but there were still a few questions about the ROW leases from Norfolk Southern which were signed by the parent company, Allied Fiber LLC.  Allied Fiber itself has been notably absent from all this.

It's been a very puzzling situation overall, but the basic cause comes down to the fact that Allied Fiber and Strome were on completely different pages when it came to the timescale of success/failure.  And if your money guys aren't on board when things get rough, bad things tend to happen.

So what happens now?  Assuming the deal closes in the next few days as projected, Strome will own a dark fiber and colo footprint along the path between Miami and Atlanta.  The question is, will they operate and grow that business, taking the time that they didn't grant to Allied Fiber itself to let the company's IRU and colo revenue to grow?  Or will they quickly sell off the assets, either as a whole or in pieces, to strategic buyers?  In other words, did they do all this to own the asset or did they do it to escape and minimize their losses?

Categories: Fiber Networks · Financials

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